Asset based lending occurs when an individual acquires a loan that is backed by an asset. In order to obtain an loan from asset based lenders, an individual will be required to offer an asset as collateral. In the event that an individual is not able to repay the lender for the debt that he/she has accrued, the asset can be seized by the lender. For most people, asset based lending is a procedure that is necessary to build and expand their estate.
A large part of the population has been involved in some type of asset based lending. These consumers will offer a valuable asset as collateral, to obtain a necessary loan. Without this type of financial strategy, an individual would likely not be able to acquire the valuable assets that compose a significant portion of his/her estate.
One of the most common types of asset based lending occurs when an individual obtains a mortgage. Purchasing a home is a very expensive financial endeavor. Most individuals do not have access to the monetary funds necessary to pay for a home. However, they are able to apply for a home mortgage loan, which will cover the remaining cost of the home.
In order for an individual to acquire a home mortgage loan, he/she must offer the home as collateral. In the event that the debtor is not able to effectively pay his/her monthly mortgage payments, the bank or lender will be permitted to initiate a foreclosure. The debtor will be required to leave the home and the home will become the property of the bank. It is important for an individual to understand the fundamental features of assert based lending, as he/she will likely rely upon this strategy to advance his/her estate.